http://jtlu.org . 5 . 2 [2012] pp. 46–59 doi: 10.5198/jtlu.v5i2.225 Understanding spatial variations in the impact of accessibility on land value using geographically weighted regression Hongbo Du Corinne Mulley Dongguan Institute of Urban Planning and Construction a University of Sydney b Abstract: This paper aims to understand the spatial variability in house prices and accessibility. The motivation for understanding the con- nection between accessibility and house prices stems from the increasing attention given in recent years to the potential for funding transport infrastructure by land value capture policies. Establishing whether there is identifiable land value uplift, and further quantifying this uplift, is a prerequisite to sensible discussions on the potential for land value capture. Although there has been substantial related research in the United States, not only have there been fewer studies in the United Kingdom, but these have concentrated on London. London, as a capital city, differs in many respects from other cities. Large conurbations such as Manchester, Sheffield, and Tyne and Wear are more typical of Brit- ish cities. This study focuses on the Tyne and Wear area, which has an extensive public transport system, with a light rail system—the Tyne and Wear Metro—forming the backbone of the public transport system. The investigation reported in this paper is underpinned by the use of Geographically Weighted Regression (GWR) methodology with property prices as the dependent variable, which in turn is explained by independent variables designed to standardize for household features and spatially defined factors including the transport accessibility of the house location. This methodology allows for estimation of the importance of transport accessibility in determining house prices. The empirical results show that, on average, the internal factors of the property and the socio-economic classification of its location are dominant determinants of property prices, but transport accessibility variables are also significant. However, the local model approach of GWR shows a significant spatially varying relationship between property prices and transport accessibility to be identified. This study contributes to a quantification of the impact of accessibility on house prices. Moreover, the paper demonstrates the application of a relatively new methodology in the transport field that takes account of the spatial nature of the data required in this process. Keywords: accessibility, public transport, land value, land value capture 1 Introduction Mulley 2006). Hedonic price methods have also been widely considered as an approach to identify the impact of transport Public transport investments improve accessibility for locations investment on land value, and this is particularly so in the where users are served directly by this investment or use this United States, (Weinberger 2001, Cervero and Duncan 2002a, investment as part of the public transport network. In general, 2002b). In the United Kingdom, two studies have employed improvements in accessibility are translated into enhanced a hedonic price approach to evaluate the impact of a light rail land values; this process is called land value uplift. In recent system on house prices in Manchester (Forrest and Glen 1995), years, land value uplift has attracted increasing attention as a and in Sheffield (Henneberry 1998). potential means of financing transport infrastructure, particu- However, to properly understand the relationship between larly in the United Kingdom, where a swathe of new light rail transport infrastructure and land value, it is necessary to deal schemes failed to be implemented because of a lack of funds with spatial data. Hedonic models, as a subset of traditional (GVA Grimley 2004, 1). However, the empirical evidence to multiple regression models, assume that the observations in the date is not sufficiently robust to identify how much transport regression are independent of one another. This assumption is infrastructure and its associated accessibility impacts contrib- likely to be broken when data are spatially correlated (correla- ute to land value uplift, and this is a prerequisite to sensible tion of a variable with itself through space), as is common with discussions on land value capture. In the early stages of seek- geographical data. Geographical data are likely to follow the ing evidence on this matter, comparison methods were used first law of geography, for which “everything is related to every- (Pickett and Perrett 1984; Cervero and Landis 1993; Du and thing else, but near things are more related than distant things” a [email protected] b [email protected] Copyright 2012 Hongbo Du and Corinne Mulley. Licensed under the Creative Commons Attribution – NonCommercial License 3.0. Understanding spatial variations in the impact of accessibility on land value using geographically weighted regression 47 (Tobler 1970, 236). This study uses a relatively new technique, 2.1 Impact of public transport infrastructure on resi- Geographically Weighted Regression (GWR) (Fotheringham dential land value et al. 2002), to take account of spatial autocorrelation by add- ing a coordinate to each point to allow the effect of accessibility RICS (2002), Debrezion et al. (2007), and Smith and to be examined by use of a local model, with residential prop- Gihring (2006, 2009) together provide major reviews of more erty prices as the dependent variable, which is then explained than 100 international studies on the impact of public trans- by a number of spatially defined factors including the transport port on property values. These reviews identify that the litera- accessibility of the house location. The quantification of trans- ture on the impacts of public transport has focused almost ex- port accessibility in this way helps to identify value uplift and clusively on the impact of rail projects: heavy rail, metro, and the potential for land value capture associated with transport light rail. investment. The literature on rail-based infrastructure impacts demon- This study contributes not only by the way in which the strates highly variable premiums, partly due to different meth- impact of transport accessibility on residential house prices is odological and data constraints of the studies. In the United quantified for a conurbation outside the capital city, but also States, evidence of the impact of transport infrastructure on through a demonstration of a methodology that can handle the land value has shown mixed findings. Both negative and posi- spatial nature of the data required in this process. tive results have been attributed to rail transit provision, with The paper is organized as follows: The next section outlines some studies giving statistically significant evidence of residen- the existing literature relating to the impact of public transport tial property price increases of up to 25 percent (Cervero and infrastructure on residential land value and the methodologies Landis 1993; Armstrong 1994; Landis et al. 1994; Cervero of these studies in identifying value uplift. This leads to the 1998; Cervero and Duncan 2001, 2002a, 2002b; and Hack methodology section, in which the use of GWR is justified and 2002). A study of Toronto, Canada, found positive land val- explained. A significant issue in the use of the GWR modeling ue uplift for subways but negative value uplift for highways technique is its requirement for data at a disaggregate level, and (Haider and Miller 2000). data acquisition issues are discussed in the following section. In the United Kingdom, a south London property de- The analysis section presents and interprets the results, which is veloper estimated that the London Jubilee Line extension has followed by a concluding section. increased the land value around underground stations by an amount that, in total, is nearly four-fold the line’s building cost (Riley 2001); a different study found positive but uneven re- 2 Background sults in residential property price change along the same line (Chesterton 2002). No significant effect was found for house To look at the impact of transport infrastructure, it would be price change in the proximity of the Croydon Tramlink, but ideal to look at changes in unimproved land (i.e,, land with no this study suggests these results were related to timing issues structures on it), but this is impractical when looking at the (RICS 2004). The first study on the impacts of Tyne and Wear impact on residential properties. Thus, studies on the impact Metro revealed that residential house prices rose around two of of transport infrastructure on land value have concentrated on the metro lines but fell near the other two metro lines (TRRL examining changes to property prices, controlling for the par- 1984). A more recent study into the longer-term impacts of ticular characteristics of the property. The underlying philoso- the Tyne and Wear Metro failed to identify statistically signifi- phy is that if all the features of the property can be taken into cant results of land value uplift that could be attributed to the account, then the price of a property reflects the value of the metro (TRRL 1993). Similar findings were highlighted in the land on which the property sits. Manchester Metrolink study (Forrest and Glen 1995), with a The literature presented in the next subsection reviews very small discrete transport-induced price rise identified by those studies looking at the impact of transport infrastructure